Why Billionaires and Governments Are Abandoning the Dollar as a Compliance Tool

In recent weeks, I've been examining the decline in the strength of the US dollar (as well as the expected decrease in its value), and considering how this will likely affect your financial situation.

In this latest installment, my focus was on exploring how the U.S. dollar has become a geopolitical instrument for coercion, penalties, and establishing hierarchies. This shift has prompted various entities such as governments, affluent individuals, and major organizations to seek alternatives in order to safeguard their interests.

On its own, this forms a two-part sub-series—the issues surrounding weaponization, followed by the actions being taken regarding these concerns—but it holds significant importance for grasping the future trajectory of the dollar as well as the motivations behind achieving potential peace. Sighing deeply.

Starting from 2014, Russia along with various entities globally has been discreetly working on substitutes for the U.S. dollar.

They've created alternative financial frameworks, hoarding gold and cutting down their reliance on dollars. Why? Because money has become a tool for geopolitics.

The use of weapons has deeper historical origins: dating back to Iran in 1979 and continuing from then.

In Venezuela, Saddam Hussein aimed to sell oil for euros. Meanwhile, Gaddafi supported a continent-wide African gold-backed dinar. Both leaders encountered military interventions soon afterward.

For many years, the United States has benefited from what economists refer to as "excessive advantage" – the capability to produce the world’s reserve currency, dictate international interest rates, and fund budget shortfalls without worrying about economic implosion.

That advantage stemmed from trust. The dollar functioned effectively as long as individuals trusted it remained apolitical. It proved dependable and secure amid challenges.

The illusion fell apart in 2022.

In reaction to the conflict in Ukraine, the U.S. and its allies seized more than $300 billion from Russia’s central bank reserves—legally owned assets kept within ostensibly neutral Western financial institutions.

You would have to go back to the Cold War era to witness something similar, and even during that time, Moscow’s reserves remained intact.

By the way... It’s essential to put aside all political biases or prejudices to approach this thoughtfully.

This served as a statement to everyone: your money belongs to you only if we permit it.

The news centered around state-owned property. However, what truly alarmed global financial leaders were the luxury yachts, the blocked-off estates, and the confiscated personal aircraft.

Russian tycoons such as Roman Abramovich watched as their lawfully owned assets in cities like London, New York, or Geneva disappeared instantly due to sanction penalties. There were no trials, hearings, or avenues for appeal. It was simply an allegation followed by instant confiscation.

Therefore, if you're a Gulf prince, an African magnate, or a Southeast Asian tycoon, that strikes near your wallet.

A lot of people put their money in banks in the West to escape financial unrest in their own countries. But now they're questioning whether the West is really more stable.

As an analyst remarked, "The instant they froze Abramovich, they conveyed to everyone that legality can no longer guarantee protection; politics has become paramount."

In 2019, the Bank of England declined to hand back more than $1.9 billion worth of Venezuelan gold, justifying their decision by acknowledging opposition figure Juan Guaidó instead of the then-current president, Nicolás Maduro.

Once more, this wasn't about money; it was about politics.

For numerous people in the Global South, this became the last straw. Wealth funds, previously considered off-limits, might now be seized should they oppose Western interests.

Faith has vanished, and once this faith disappears, no level of consolation can completely rebuild it.

Currently, whether correctly or incorrectly, the dollar is viewed not as a universal public asset but as an instrument for enforcement. Utilize it, otherwise face isolation. Endorse US policies, or potentially lose your possessions.

The dollar transformed into a compliance tool rather than a means of exchange.

The freeze of Russian assets marked a pivotal moment, not due to its impact on Russia itself, but because it demonstrated to all others what might befall them.

The sanctions imposed on Abramovich transformed that cautionary message into a soft murmur amongst tycoons: withdraw your funds as long as you still can.

Venezuela’s situation demonstrated that the rules were different now. Maintaining alignment is more important than adhering to the law.

The outcome? Nations and affluent individuals are shifting their assets abroad to safeguard themselves as they must.

Dedollarization is not merely an economic strategy anymore; it has become a necessity for protecting one's currency.

The dollar isn't crashing; instead, it's being redirected just like a river whose flow has been altered. The original channels still remain, yet the water is discovering new routes, leading to fewer aquatic life and plants.

For numerous countries, these alternative routes steer them out of Washington’s influence. In response, nations are acting in the only manner possible: discreetly constructing a global order where such reliance becomes unnecessary.

The second part of this segment will be available next week.

Peter McGahan serves as the CEO of Worldwide Financial Planning, an independent financial advisory firm authorized and regulated by the Financial Conduct Authority. Should you have any questions related to finance or dedollarization, please contact them at 028 6863 2692 or via email. info@wwfp.net